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- [00:06]
A
Hi and hello Watch fans and welcome to another edition of the Real Time show. With us, your in house provocateur David Vaucher calling in from Fontainebleau. And me, the friendly neighborhood jeweler Alom and Joseph dialing in from my beloved Amsterdam. How are you, David?
- [00:22]
B
Doing well. Bonjour, Bonjour tout mondes. You know, it's always a good day when I get to log on here and talk watches with you. So looking forward to this episode.
- [00:31]
A
So do I. It's always fun to jam with you. Our mail bag has been filled again nicely. One of our newest listeners who reached out to us through the contact form is Burned Burned wrote to us a few weeks ago. I started to listen to some of your recent episodes. Great show. Jumped right to the top of my favorite watch podcasts. Thank you Bern. That is exactly what we want to hear. And thank you for reaching out. His question. First things first, you are recently bringing up gold watches and what listeners suggestions for a great gold watch would be. Well, my first choice, and it's actually on my list, will be the grand cycle quartz 9587 dash 8010. There you have it. No need to look any further. Which gold watches, if any, would you be tempted to buy on the current market at retail? And if there aren't any or many, which vintage pieces would you be inclined to pursue? So thank you. Burned. David, the honor is yours to kick off with your answer. I know you have a two tone one. Do you aspire to wear a full gold watch?
- [01:57]
B
Oh man. Yeah. I think there's an article just in the do you like two tone or not? Just right there and off the bat, I'll say I do. You know, I'm a product of the 80s and my dad had a two tone watch. So it doesn't shock me at all. It's just I like it. But if we're talking full gold, you know, I think the choice of a Seiko quartz as a full gold watch is really interesting because there's a juxtaposition there of something that people don't associate with very expensive with something that is, which is gold. And I have to be careful because obviously Seiko quartz is not quartz as we know it. I mean the whole, the whole package is high end. I suppose if I were thinking of gold, one of the first reasons that I have not bought one, let's obviously set aside cost because I think, you know, it's an obvious consideration. But let's just set that aside a big consideration. And Alan, I'd love to hear your point of view from Amsterdam, because I've heard a lot of stories is safety. You know, where I live in Fontainebleau, I kind of take for granted my safety. But going beyond that, I would hesitate. So I think that to put so much money into something I hesitate to wear is a little bit sad. So then let's just kind of set that aside and assume that's not an issue. What you want to do is have a watch where you're not just buying like the gold for the gold sake, if that makes sense. It has to add something to the watch. So when you talk about a submariner and then you talk about a gold submariner, it's not really a tool anymore. But there's something about a gold submariner where you think, huh, this makes no sense at all. But this is really, really, really fun. And so if I were buying gold, it would have to be something that's fun. So I tend to buy very practically and gold, to be honest, you know, Alan, maybe you have something to add here, but it's not a very practical material. Like, if you're looking for specs and strength and hardness, gold's actually pretty terrible. It's. It's heavy and it's soft. It just doesn't do what stainless steel and titanium do. So if I were buying a gold watch, I think it would have to be something where it was just over the top, super fun and like, it just ties into the whole package. So maybe after we're finished recording, I will have a different answer. But Alan, you know me, I love hublos. So I'm just going to say, like, give me the full gold, you know, hublot Big Bang chronograph, and that'll be the one for me. What do you think?
- [04:34]
A
Bam. That's a curveball. That one. I didn't expect. Cool pick. It underlines the fact that you love hublot. So very cool. Now, question for you, and probably you've addressed it in your article, but assuming I didn't read or heard it, is a two tone a poor man's gold watch or does it add a bit of bling to a steel watch? Why do you think they ever made two tone watches?
- [05:06]
B
Ah, man, that's a good question. I can't put myself in the shoes of whoever first came up with that. It's a look, you know, I don't, I don't. I mean, okay, it's less expensive. Sure it is. But I think that if you opt for the two tone, you're opting for A look, right? Because you know, like I used to be quite tanned and I'm not anymore because I work from home, you know, like whatever. I stay home a lot and I just don't know that gold goes with my skin tone very well. And I'm sure I'm not the only one that thinks that. So if you buy two Tone, you're sort of cutting that edge off a little bit. And, and you're buying a look, you're buying a vibe. Like I don't associate it with the 80s, but if one did associate it with, you know, for example, Miami Vice, then they get to have some of that magic. Like in my case. Actually my personal story with two Tone is my dad worked for an oil company. And if you drive around Houston, certain parts of Houston anyways, it's just very common. It's called the Texas Timex. And that's a vibe. Whether it's one I want to create all the time. Not necessarily, but I don't think. Okay, Alon, you know this as well as anyone. Like you should never. And I'm sure you tell this to your customers, you should never buy something as a substitute for something else. So if you really are buying a two tone watch because the gold is unattainable, save your money. You know, look on the used market, do whatever you have to get the gold. But it's a look, it's a look by itself. And so if you like two tone and that's your thing, then you should absolutely go for it probably.
- [06:37]
A
Bernd clicked on one of my comments about really wanting a gold gold watch. And the discussion that I have perpetually with my brother, he actually purchased a vintage Rolex day date. So we're talking about the 36 vintage ones. I want a champagne gold dial. He wants a white one, Roman numerals. I want indexes or a stone dial. So he actually pulled the trigger on that. So I've said it on air. That's one of the highest ones on my list. So that's vintage now in modern era, I've said on air that I really contemplated wearing a full gold gold Omega Speedmaster or a Zenith Chronomaster Sport Gold gold. So that's where I am at right now. Good news is in today's market, it's very much more obtainable to get a gold watch because prices came down hard and the ones that get hit the hardest are the gold pieces. And for a few months now you're hearing more and more and I've encountered it myself, it's possible to get discounts on new Rolexes at the Rolex ads. And you can guess which ones. It's the gold. Gold pieces. So for everybody on the fence, it's becoming a buyer's market. And regarding your grand cycle burned your baller baller that you've chosen a quartz. I have to admit my knowledge of grand cycles is not enough. So I had to Google the 9587. I love it. It's stealth, it's gold with a champagne dialogue. Total cool watch. So good on you and I really hope that you'll get it soon. And make sure to join the TRTS community where you will share your wrist shot with that watch on.
- [08:39]
B
Yeah, actually, Alan, if I could just add, because see, this is. You always say the show is dangerous because it just kind of brings up more ideas, you know, in your mind. I would say that, you know, I said it was like at the end of the show, I'm going to have a different answer. Well, you actually just said the two ones that I think would have come to mind, which would be basically the president, which I would buy just to celebrate, like being awesome at life. Right. And I don't usually think that about myself, but if I'm buying a president, it's because I've done something awesome and I want to remind myself for that. And I think that a gold Speedmaster that is awesome. I don't know that it's something that would be the first choice to go to space, but Speedmasters are great. Gold looks super nice. So gold Speedmaster do it. But yeah, I'd love to see a picture of your president when you finally get it. That sounds like a fantastic watch. Let's go ahead and move to another question. I'm going to put my unwatched wrist into the virtual mailbag here. We have a question from one of our readers. Our listeners, sorry, Lawrence Van Hove. And I apologize, Alan, if I have mispronounced that. Lawrence asks, where on the wrist should you wear your watch? I see Patrick and you wearing on the wrist bone. I did that way till my brother corrected me approximately 10 years ago. So alon, you are an expert watch where? What do you think?
- [09:58]
A
Lawrence Van Hove? Thank you for the question. And we actually share a bit of roots, so I will say Lawrence Jun Baba Jun, your brother did not correct you because there is no correct way. Okay, you do you. You should wear your watch however you feel comfortable. Maybe your brother refers to the fact that back in the day, there was more elegance, more style, there was no flexing and need to be more elegant. So you would wear your watch under your cuff and you wouldn't flash a front your watch. In that case, they usually say you wear the watch behind the wrist bone towards your biceps and so not towards your hand. Today everybody wears their watches rather loose and the watch dangles on your hand instead of on your wrist. Probably that's what he and you are referring to me, myself. I also think it depends on your biology and your built. So if I don't wear a metal bracelet, I usually wear it behind my bone as well. With my shirts I usually have the cuff made a bit wider on the left where I wear my watches. So I have the ability to wear it under a cuff. But as a jeweler, obviously I need to show my watch all day long and as a watch nerd as well. So I wear it up and down. If I have a metal bracelet, I tend to wear it looser because I don't like things too tight on my skin or my wrist and then it will literally slide up and down and obviously your hand and wrist swell during the day. Irrelevant of temperature or locations where you are or if you work out or not. And that's why the beauty of the arrival of micro adjustments in metal bracelets, which took the brands quite some time to achieve that, are a huge, huge savior. Because some customers that I know simply had to return their watches because there were no half links in metal bracelets. Take for example the previous Omega Speedmaster. So with the 1861 caliber for that bracelet, they literally didn't have a half link. So that was really a pain in the ass. So that's how I wear my watches. How do you wear your watches, David?
- [12:35]
B
Well, I think, you know, good for you Alon for just stating right off the bat there is no right way. Because if I'd have gone first, I think I might have said, well, you know, this is how you should wear your watch. But yeah, you're right, ultimately everyone should just do what's most comfortable for them. You know, speaking personally, I cannot stand to have loose watch. The micro adjustment obviously is a huge innovation, but that doesn't stop the fact that whenever you first get a watch, it's usually coming with, you know, three, four extra links at least. So my first stop is always either to my desk if it's screws or to the local jeweler if it's collar and pin. I just, I like, I'd rather have it in fact a little too tight rather than having it flop around. I think there might be a little Bit of a broader discussion here. I certainly wasn't thinking this way when we first thought about what we were going to talk about for the show. But the loose watch trend, you know, there's, there's a joke, and it's not really a joke. It's. The truth is, like, watches are man jewelry. Now, clearly everyone can wear a watch. But, you know, if you look at kind of, I would say, conventional codes, a watch is one of the few pieces of jewelry that, that men will wear, and that's loosening, right? And so if you look at a lot of the stars who have many watches, you see them on Instagram, it's almost like the, the watch is jewelry because it's like, you know, like, yeah, it's, it's like a bracelet or a cuff that you might sell in your store. Ellen. Right. And I can definitely see that being looser. So I think maybe it's, it's related to that, the other thing too. And, and I'm kind of mixing demographics here, and I'm doing that because I'm really asking the question. But if you look at trends for clothing, so I've been in the clothes, you know, most of my life. I know, Alan, you've been into sneakers for. We probably started liking, you know, our respective clothes and sneakers around the same time. But when I was growing up, Tommy Hilfiger, Ralph Lauren, Nautica, the trend was very baggy. And as I became a professional and an adult and had to start wearing more formal clothing, you know, that for me happened during the Mad Men era. So skinny suits, skinny ties, and I don't think you will ever see me changing. And you were, you were not going to see, you know, what were they pushing back then, like a Tissot Viso day or a JLC Reverso that was not going to be hanging off people's wrists. Now, as those clothing codes have really kind of evolved and now anyone can do anything, which I think is great, you see a return to some of those looser fits, right? Looser tops, looser pants. And I suppose that in that respect, it would kind of break the silhouette if you had a super tight watch. So just to summarize that, I would say that it's probably going to depend on the type of watch. So if you are wearing a Patek or a jlc, that's probably going to be on a strap, it will probably be, you know, relatively fitted. But I think at the same time, like, just given how things are evolving, I'm not surprised that there is this Move back towards a little bit of a preference for looser wearing watches.
- [15:33]
A
Yeah, interesting. So yeah, you see trends in fashion. I don't know if you really can extrapolate it to the watches in way of wearing baggy clothing versus skinny fit and that I think that people tend to wear it looser as it links to flexing culture and what you said rightfully. So if it's a jewel, then you'll wear watches on a metal bracelet and especially gold watches on gold bracelet more as a bangle or a bracelet or as a jewel. So yeah, that's very interesting. Thank you so much. David. Interesting link to fashion going from fashion to trends of the industry and more on the financial side of things. Jacques Jordan, JJ sent us a message on LinkedIn and he asks what do you think of the current state of the industry after seeing all the financial results from the big groups, especially Swatch Group tanked hard. What do you think about it and why have they specifically suffered so much? Oh, what are you two cents on that topic and both topics actually. David.
- [16:51]
B
Okay, man. I feel like, you know, Alan, we're going to make up the balance of the episode maybe just talking about this. There is a lot to unpack here. So I don't have any, any data in front of me. I'm just going off of what I have read. And so I'm going to go off of memory here and say that I do remember in fact that the Swatch Group's results were, were disappointing. I think we'll say, I don't, I don't know how much. I think it was a very strong fall in revenue. But I think people were disappointed with Swatch Group. I know that recently LVMH has been affected. They had a fall in revenues. I don't recall Richemont's results, but I think, I think generally we can definitely summarize. Like okay, results came in and they were underwhelming. There's a couple things to consider here. First is that we are on the back end of, well, I think we're well out of it now. But as everyone listening to this show knows, there was a huge increase in the interest in watches during COVID and as the pandemic has receded as people have options to spend their money elsewhere and as I've talked about before, as just life gets more expensive and as the industry tends to focus on a narrower set of people, there is less interest in buying those watches through the traditional channels. So I think the first thing we have to discuss, and I don't think I have an answer because again, I don't have data in front of me. Is this a true like collapse, if we can call it that, or is it just a reversion to historical trends? In other words, like in a world where Covid, you know, didn't happen, are we now back to where things would have been after just, you know, three or four years of growth? So maybe. Alan, let's just pause there. Like what do you, what do you think, what do you think of that? I mean, based on what you're seeing on the ground, are we actually talking like the industry is losing ground or is this just kind of turning back to how things would have been if it hadn't caught fire over the last couple years?
- [18:49]
A
So very interesting question and maybe before I answer that, create a bit of context and benchmarking. So richemont did a minus 13% in turnover. Swatch Group got hit very hard. They went down in Turnover about almost 20%. I believe it was something like 19%. And their profits went down by almost 80%. 70 something. They're still profitable half year figures 2024. So and I did a deep dive because I do consultancy, both strategy marketing, product development for luxury brands, including watch and fine jewelry brands. But I also do very top level financial consultancy for investment groups that invest in the luxury industry. So it's, it's interesting to do these mental exercises as well. So because of that I literally did some research. Swatch Group also went down in margin. So they went from a regular 19% to an operational margin of 11%. Whereas we say in the industry a good level is 25 and exceptional is 30. So Swatch was already below par on that. They also always speak about the effect of currency and that's maybe something you can add. I find it weird that these publicly listed companies that we're talking billions. Swatch Group, if I remember correctly, does about 8 billion billion turnover a year. They don't hedge the financial forex exposure that they have. They do obviously a lot of they, they're in Switzerland, so they have an exposure Swiss Frank to all other currencies. And what currencies are important to them? First market is us so US Dollars. Japan is very important to them. So the Japanese yen, which tanked hardcore, but the exposure that they had was 3.6%. You have to imagine they lost 145 million Swiss francs just an exposure of forex. And that that I can't comprehend because that you should hedge out. I mean obviously you can't create always a zero sum game on foreign exchange rates but 3.6 sounds for me that the CFO needs to be replaced. But that's a side note. We see obviously a hardcore dependency on China which went down. They have been moving up market on mono brand boutiques. Obviously that's a topic dear to my heart. And that was my first auto call that aired a while ago on the Real Time show. And what's very important, they keep on mentioning the Moon Swatch in their financial results, how important that is. And to put that into perspective they sold 2 million moon swatches and if the going rate is around 250 in whatever currency, we're talking about half a billion of their turnover being just these moon Swatches and those are sold solely in their own boutiques. That means the full margin goes to the Swatch group and Swatch brand. So we're talking about about 80% margin. If you extrapolate that or deduct that, let's say this is a drug or a vitamin you're taking and these sales are done because you're here. Noises on the ground that everybody's fed up. Everybody says swatch, pull the plug already on these moon swatches. And if that happens or they die out or they fizzle out or they don't sell anymore, what does that do to the financial results of this watch? So these are little things that worry me. We always see a downturn. To answer your specific and very valid question, are we going back to normal figures? I would say kinda. Apparently Rolex has stated that their profit went down by 20%. So that says that something's going on. But we come from an extreme high. Not an extreme high, an all time high. The Swiss watch industry has never ever produced as much and more importantly, it's not so much about quantity but value. They've never sold so much. That being said, we have to remember all these Swiss export data that we have at hand, which is public data, is sell in to the retailers, their own mono brand retail of the brands. But of course the wholesale part of it is going into retail. That doesn't mean that it ended up on consumers wrists. So that's data that we don't have. Is this a good correction? I think so. We've been saying on the pod here that the market has gone in overdrive and we even dare to use the word bubble. So it's a natural correction, it's an important correction, it's a necessary correction. I always and always and always couldn't understand why in the luxury industry, whenever the brands were talking about budgets, there is always a plus, never ever, ever a minus. These brands has never said, hey guys, the outlook is wrong, let's do less this year. But if we study economics and history, everything is cyclical. Everything that goes up must come down. So how can it be that they always predict growth and then get shocked and punished by the financial markets because they didn't anticipate these down cycles? So now everybody is in shock that these luxury groups are projecting red figures and minuses and diminishing growths or declines or losses. Whereas it's very logical. The world is on fire. We have two raging wars going on, huge elections going on in Asia. Obviously there's a lot of tension and volatility and that never came up since the COVID era. I mean, the middle class in China is suffering very much. There is less tourism, they want them to buy locally. Prices are high there. So in a sense, I think to answer your question, yeah, it's a good thing.
- [26:11]
B
The currency effect is huge, Alan. That's right. The effect of a pullback from Chinese consumers is huge. Although it's not the first time that's happened. That happened, I think the mid-2010s when they changed some of their gifting laws and the industry recovered. You know, the question specifically though was what is the state of the industry at this point? And we've talked about this on the show before, Alan. To me, I think the industry has taken Jean Claude Bavier's insight of let's make watches a luxury and I think doubled down on it to a point where it's not becoming healthy. Because, you know, we're talking about publicly traded companies here, right, But I think if you looked at Patek, my feeling is that they might be doing better. At least that's my sense. Hermes is, is publicly traded, obviously, but they are super, super high end and from the headlines I've seen, they seem to be doing okay or at least better than their, than their, their other peers. And so what we saw at Watches and Wonders earlier this year, what we continue to see is that the, the aspirational consumer who might just want to treat themselves is being left behind. And more and more, it seems to me like the, the thesis behind some of these companies is we're going to sell the highest dollar watch as possible to a very limited pool of people. And that pool of people, you know, might have, maybe their resources are unlimited. I, I don't know, maybe there are people for whom it's like, yeah, whatever. It's like, you know, buying a cup of Coffee when they buy an NBNF or when they buy a, you know, pick your brand. But long term, I just don't think that's very sustainable. You know, one industry analyst I'm sure you probably know, Alan Oliver Mueller, he's I think revolutions kind of go to, for analyzing the industry and with regards to Swatches results, he looked at what their inventories were and said, well, if you look at the, at cost, you know, values of these inventories, they're, they're actually like running several years worth of inventory. And my sense is that it's not just Swatch. I think there are a lot of brands who, who have a lot of inventory. And the last time this happened, the one, the example I remember is Cartier, like you, they almost couldn't give them away. They were buying them back to destroy them. This was again back in the 2010s and we haven't gotten to that point yet. So if you asked me to characterize the industry currently, it would be in two ways. I think the first one is just, it is, it is bifurcated and, and, and, and focused on a group of people that I don't think allows for the long term sustainability and growth of the industry. That's the first one. And the second thing I would say is that if you were looking for a bargain, you, you should keep waiting because I think that the, the worst unfortunately is still to come. And if you take the counterpoint to that, then what you're saying is, well, I think the industry is due for an upswing and we're not there yet. We're not there yet. I don't know when that point is, but I think that there's still unfortunately more pain that brands are going to have to go through before they get to the other side. What do you think, Alan?
- [29:23]
A
I think that we've definitely have not seen rock bottom. That was my prediction also, especially for the Swatch group. There are a lot of things there in flux. What I've tried to explain to these financial institutions, they sometimes get confused about brands and groups, meaning you need to compare apples with apples and not apples with pears and definitely not apples with oranges. Meaning they have been thrown off by the fact that Swatch is a watch brand and the financial holding, the group has named their group after that particular brand. So they've sometimes mixed these two and they've sometimes compare Swatch Group to just Cartier. So for our listeners that are maybe not that familiar with the groups in our luxury industry, there are only a few that are still today independent, which are Patek Philippe, family owned, family run, just one brand. Rolex technically is not a group, it has become a group. Now why? The Hans Bildorf foundation is technically family owned, family run. But because it's a foundation, people have no idea who the shareholders are, what turn of war profits they make. They don't publish this data. They've always had the brand Tudor. So technically that makes them a little group. Since they've bought the retailer Bucheler, including the watch band Carl F. Bucher, they now have a retail arm, multi brand, technically independent and another watch brand. So they've become a little group. But okay, for the for argument's sake, we'll call Rolex an independent brand. Then you have Audemars Piguet, same story. The family Audemars is still running the show. Jasmine Audemars is on the board and is a unicorn. Unicorn companies are those that do a billion either turnover or market value or whatever you want to call it. And those are the big independents that are left. Let me rack my brain quickly if I forgot one. Technically Hermes is one as well. And although they're trading publicly, Chanel as well, but that's slowly becoming group Then the biggest groups, the biggest luxury group in the world is lvmh. Louis Vuitton, Hennessy Emoet. So obviously liquor side of things, fashion side of things, started buying watch brands like Tag Heuer, Zenist, Hublot, Hublot and Bulgari. They have Dior watches, they have Vuitton watches. Now they have manufacturing capacities. They've just spun off Daniel Roth Gerald Genta watch brand and doing more and more in the watchmaking industry, bought Tiffany and company. Mr. Arnault, the owner, the majority shareholder of the publicly trading Louis Vuitton is still I believe the most wealthy person in the world. So think about that. He surpassed scalable business entrepreneurs like Bill Gates, Steve Jobs, Elon Musk, Bezos, Jeff Bezos, Amazon, et cetera. So that's very interesting. With an old school trade of things that are made by hand and that are definitely overpriced. He became very wealthy. So it's he's doing something right. Then you have Richemont run and Manchuria. Shareholders are the Rupert family from South Africa. They have brands like Cartier, Van Cleef and ARPEL, but also IWC, Panerai etc and 12 or 13 more. These two groups, including Kering, the majority brand there is Gucci. They have less watch brands. They used to have Girard, Peregau Listen and Cecho they let go of those brands. They run it like a financial holding. Although each maison, each brand has manufacturing capacities, it's not so much an industrialized group. Their financial holdings, meaning they give financial support, back office support, structural support, legal support and maybe marketing support to their independent maisons. Swatch Group, however, majority shareholder are the Hayeks. And although they own around a quarter of the shares, they have a voting right of over 38%, which makes them the biggest and influential shareholder in that group is a bit different. And that's what I also try to explain to these financial institutions that want to buy their shares and stocks. Swatch Group is very much industrialized. What do I mean by that? They came up by consolidating the Swiss watch industry and the biggest gem in that portfolio was eta, ETA and all the manufacturing capacities with PK and Nouveau, lemania and et cetera. So Swatch Group came from an industrialization concept of sharing calibers, production capacities and then clicked on brands from that very high end being Breguet, Blancpain, Omega, going down to Longines, Tissot, Swatch, Flick, Fluck and a few way more brands. But that also is another important asset. Besides being very much industrialized, they are the odd one out in these luxury groups because they are not. Some call them snooty in the sense that they only have hard luxury, high, high, high end brands. They also have Swatch Tissot. Even Lungin is not so much hard luxury. Whereas the lowest brands within Richemont and lvmh, the lowest technically entry brand within Richemont is Bonmer Sh. And for lvmh I need to rack my brain. But technically those are the quartz Dior watches. If I need to pick one very quickly and correct me if I'm wrong, David, So overall they are a bit different. And because Swatch Group produces so much, that means they have way more inventory.
- [35:55]
B
They.
- [35:56]
A
Click back to your topic of inventory. So do you want to ping pong back on that before I ask my other question to you on this topic, David?
- [36:04]
B
Alan, this is sort of what I thought is like we could talk for a very long time about this. There's a lot of directions to take this. You know, one of the things that I just want to mention, and it's so important that I've actually just turned in an article to rob about this, is that when you talk about important companies in the industry and this bifurcation of where brands are going, I think Swatch again is positioned to really save the business. So in the same way that the Swatch brand. So Swatch watches sort of saved Switzerland during the quartz crisis of the kind of late 70s, early 80s. They are the only ones and Alan, maybe you have a different view on this, but they are the only ones that have this mix of IP and industrial might and can do the things that they do. So for example, like if the moon Swatch, that was not happening anywhere else and as much as some people might say, oh, it's tired, it's played out, hugely, hugely important and in 30 years time we're going to look back on that as a milestone release. Then just amongst some of the brands that you said like, no, Gene, Right. I mean I know that back in the day it used to be on par with Rolex, you know, 13 Zn movements, all that, but at the same time, you know, now they're still a very important watch to get people into watches. I think in Asia they are hugely popular. And so what you have with Swatch is a company that can share, that can share these movements. They have an industrial kind of philosophy where things do get shared and so you can produce very high quality watches for much less than if they were being produced anywhere else, if even at all. I mean, in lvmh for example, I know it's, it's a little different because the price tiers are higher. You don't want to be seen as just having one brand copy the other. But Swatches is hugely, hugely important. And so when you see things like inventories piling up and profits going down, you know, I, I, I don't really see a world where Swatch doesn't exist. I mean, look, anything can happen. So maybe in 50 years time the Swatch group has dissolved and you know, LVMH owns Omega and you know, Longines just doesn't exist anymore and it gets resurrected by a micro brand, you know, who knows? But I think Swatch is a very particular place in where the business is at now because on one hand it is extremely susceptible to the things that we've just talked about, you know, currency fluctuations, inventory builds up buildups, but they're the ones that I think are going to help really propel the next phase of the industry. And the last point I'll make is that I think there's still some things to sort out though, because you know, you talk about a missed opportunity. Alan, you mentioned Breguet and Blancpain. Like Swatch does very, Swatch Group does very well at the more entry level tiers. Then you hit Omega, it becomes a little dicier and then you hit Blancpain, Breguet and it's like crickets almost. And so it's a shame that they couldn't have turbocharged the marketing, turbocharged the outreach when watches were on fire and just really kind of gotten something going for those brands. Because now when the industry seems to be relying on high end watches, I don't think Breguet and Blancaine are part of the conversation. What do you think?
- [39:21]
A
Kind of concur with you. For argument's sake, we have a lot of ground to cover because we actually have a question that links to this question and I want to deal with that one in this episode. But before we do so, I'm actually very curious and I've been meaning to ask you this quite some time. You're living in the us you sound like an American. Why do you think the American market became the number one market for Swiss exports? And to link another question to that, and you can take it as an essay maybe, do you think that the US can hold ground as being the number one market and if so, how much growth potential is in that market, if you catch my drift?
- [40:07]
B
Man, great questions. You know, I had a business school professor who always say, you know, be careful not to base your answer on the data point of me, right? I'd love to have some more data. But I do know that what you said is true according to the swisswatchexports. And again, these are, like you said, sell in numbers and not sell through. But the US is the biggest market. And what I find interesting, and this is going to be the basis of my hypothesis, is that even just in my little town in France, right, there's like 15,000 people. It is not uncommon to see PRXs. It is definitely not uncommon to see moon swatches. It's almost daily. And I think the stereotype to an extent is true. People here kind of grow up with a certain sense of style and it's very accepted. Like, you know, you do your, maybe not your first communion, but you graduate from high school, you do your exams, you get a nice watch. And I think that that is part of the culture in the U.S. obviously celebration. You know, there's different events to celebrate. But I don't think I'm going out on the limb by saying that unless you're in some of the coastal cities like Los Angeles or New York, the fashion part is not, it's not really there. And so I don't often come across just people casually wearing what you call nice watches. When I'm talking About my experience in American, it really does seem to be like the one person in oil and gas who has, you know, the, the two tone Rolex or people who have a lot of disposable income and who are just buying watches because they're, they're expensive. I don't know that it fits into a broader narrative of kind of how, and I have to be super careful how I say this, but it doesn't have the same context that the Europeans have when they, when they go for these things. So to answer your question, Alan, I think right now it is the watch market. Seems to me, and I'm several years removed from living there, it seems to be an extremely good illustration of what we've talked about before, which is selling very expensive watches to a very small number of people. And as the conditions allowing for that monetary buildup change, I think that's when we'll start to see that watch market change as well. So just, you know, hypothetically, you know, in a world where the dollar is not the world's reserve currency, for example, and again, just extremely hypothetically, that would have an effect. In a world where, you know, the tech sector pull continues to pull back, that would have an effect. So I think you're looking at something fundamental has to change in, in the way the US economy and market is set up. But I think the one thing I do feel confident in saying is that it is, it is not the same context for buying and wearing watches here as it is in Europe.
- [43:00]
A
Very interesting. So to create context, Apple apparently sells 37 million Apple watches, okay, a year. That's two and a half times the whole total Swiss watch industry. Now I'm stating that just to put things in perspective, because these Swiss watch brands and especially these groups think the world revolves around them and they're the center of the world. So A, that puts things into context and makes it relative. But I'm using this now for a different reason. I've been always told that the Apple watch and the smartwatches is a good thing, especially in the US or North America where it teaches people that usually don't put anything on their wrist to put something on the wrist. They're getting used to absorb time from the wrist and at a certain point in their evolution, they want a real watch. That being said, a luxury watch or mechanical watch or something that's more classical than a smart watch. Do you A, think that's right? And B, could we say that the Western world, so the old world being Europe, was more educated, more accustomed to wearing Watches because we're closer to the fire. And as you said, there's a gifting culture as simple because education goes up in North America. Or do you see other factors?
- [44:40]
B
Oh, man. Great, great question. I think there's probably enough for a historical book here as well. You know, what's, what's, what's wild as you were talking about this is that, you know, the US Was a hotbed not, not of watch, well, watch consumption. Yeah. But at the end of the 19th century and early 20th century, watch manufacturing was huge in the U.S. i mean, you had like Waltham, you had Hamilton. IWC was set up actually by, by an American.
- [45:07]
A
Essentially.
- [45:07]
B
He went to Switzerland and started his, his watch adventure there. So clearly there was something that just never picked up. I mean, as far as I understand things, up until probably the 60s or 70s, I think, you know, watches were something you just wore as a tool. They weren't necessarily luxury items that people would wear you, they just were tools. And you had your, you know, neighborhood watchmaker. There were a lot more of them back then. And your watch was kind of like just an appliance that you would get serviced and fixed as you would your kind of washing machine or television or whatever. And it just seems like at some point that culture of wearing a wristwatch dropped off. It just, it seems like. Whereas in Europe, you know, that which was, you know, very used to kind of traditional markers of luxury and, you know, maybe different social mores. Like, it seems like there, that was always there. And then, you know, you fast forward and I'm fast forwarding a lot here, and you get to the Apple watch. And I would love to know the regional breakdown for those Apple watch sales because as, as much as I see nice watches or nicer watches on wrists here in Europe, I don't see, I see almost, almost no Apple watches. It's not like I don't see any of them. But. And this, I know this is all very anecdotal, but I don't see them almost at all. Whereas when I come across, you know, American tourists or the few times I've gone back, the Apple watch is huge. And again, I'm just, I'm just speculating here, but it seems to me like, you know, one thing that I do think Americans do well compared to Europe or do differently, if you want to be less subjective, is they're just super big on like tracking and maximizing everything, you know, like, what was my sleep like, how many steps did I take? You know, am I getting enough water or sunlight or Whatever it is. And the Apple watch is very good for that. And so I think it does so well there because it ties into this mentality that people have, you know, which is just not shared as much by people in Europe. So if you look at it that way, I don't think that there's really a ton of ground to convert to a traditional watch because if your selling point is the data and the stats, well, you know, a mechanical watch is not really going to offer that to you. And so it seems to me like we have ended up almost where we started, where, yeah, there's something on people's wrists. But again, you're not really going to grow the pie, which is what I would love to see the industry do. And so you're just selling more and more expensive watches to the same, you know, handful of people over and over again. What do you think, Alan?
- [47:51]
A
I think we have enough content here for you to write a very interesting article about this. To ride out this episode, Max Loyal from the TRTS network asked something in the same vein. What's your feelings about the current landscape in industry? Do you see brands lack of reaction to this downturn as a sign the market will eventually rise up again? Or will the ignorance be a reason for their further downfall in the future? So, taking everything into conclusion that we discussed, he asks basically two things, so let's dissect it. What, David, are your feelings about the current landscape? If we take a macro view on everything, you can take consumer behavior, you can see the prices on the secondary market or action results. Take it broader into fashion or the global economy. What's your feeling about current landscape? Just share feelings. Changing.
- [48:56]
B
If you had to ask me one word, I'd say changing. And when I worked for a consulting firm, one of the partners always say, I don't mind if things go down or they go up, but I don't want them flat because that means there's no business for us. And I suppose that if you think of a changing landscape, it just means that there are opportunities for people who want to do things differently. I mean, if, if, if I had to give one. It's not really a criticism. I think it's more just an observation. You know, the luxury of business is meant to appear like they just float above everything. You know, when you walk into a boutique, you're. You're supposed to assume that everything in there was made like, you know, by, by elves and fairies in the magical forest and sprinkled with, you know, the magic dust at the end. Right. But that's just not how it works. And so just because they almost have to, they have, they have to be disconnected. Right. And I think that's, you know what you're saying Alan before about everything's always up. But I don't think that's the case anymore. I think that consumer tastes are changing. I think that there is a much more educated population about watches out there now than there was before. They're going to have different, different expectations. They're going to want to buy differently, they're going to want to buy different products. And I don't think the industry is going to disappear but I do think that it will look very different in five years time than it does now. So I'd say one word is or two words really is influx. What do you think?
- [50:20]
A
I'm not going to respond to what I think what you said because I find it interesting and kind of concur just shooting out an emotion as well. I think that the current feelings about the landscape are negative and I think there is denial going on. And that links into the second part of Max's question. Do you see brands lack of reaction in downturn as a sign? Yes, they are. I call it ostrich strategy. Stick your head in the sand and hope the storm will pass. So I see fear and when that happens or when you're attacked you can do three things right? You can freeze, flee or fight. So the three Fs and it's often that these brands choose for freeze or actually maybe not rationally but that's their reaction. They definitely are not going to admit that it goes bad. They try to mask the stink with perfume because we've just discussed what the big groups have published and that's what we see at the top because imagine that if the super wealthy, super healthy Rolex, LVMH and Swatch group and probably Richemont are suffering that hardcore it's double digit and not just 10.1% right. Or 11, it's 20 plus. Imagine if you go down the pipeline or if you go down the pyramid how much blood is running through the streets. So the industry in as a whole is suffering like crazy. But what changes are being made? I don't see that many. So will their ignorance be the reason for further down from the future as Max states or asks? I think so what are your $0.02 on that particular question or topic David?
- [52:27]
B
I totally agree. The watch industry, you know, has been through so much. I don't see any of these large brands disappearing. I don't see that. But I think, as we've said, the worst is still to come. And I would just say that if you are a consumer, it's a good time for you to, well, to shop around. I think after a couple years of frustration, hopefully you can save your pennies or unload the pennies that you have and get what you want. I think that's the first thing. I think the second thing is that it is very easy to be cynical about a lot of this stuff. I am very cynical. That's basically my reason for being the show is I'm the provocateur who provides the dose of cynicism, but at the same time, like, it's fun. Like, I like wearing these things, I like thinking about them. And so I don't necessarily think. I'm trying to think how to put this. Like, I don't want to kick the industry just because I can. Like, what I'm saying is, you know, don't walk into a boutique and pay list if you can get it for 30% somewhere else. You know, don't do that. But at the same time, if there is something that one can do, like, you know, a constructive Instagram comment on a brand account or, you know, if you get a chance to talk to an ad and you say, hey, like, you know, you could make the sales experience a little better, I think on the aggregate, all of that will help, because I think, you know, I do believe that when brands hear some of these things enough, it does tend to bubble upwards and it works better for them because they can do it quietly. Right. I mean, I don't. That's just. You have to kind of. It's just like with people, you have to know how to address people. And some people, you know, would rather just be told quietly, address it quietly and be done with it. Right. So I think that one way to voice your discontent is not to pay MSRP if you can get it for 30% off. But I think also if you're going to do that and get that in return, yeah, just try to help out constructive criticism. And if enough people do that, you know, I. I do eventually think that we'll see some changes, but either way, I think, you know, after being abused for a couple years, that, yeah, do get some of that back. Is. And I know, Allan, it's. It's difficult for me to say that because I know you're sort of caught in between two landscapes here, but I think as a consumer, if you're looking for a deal, now's the time to.
- [54:48]
A
Get it totally agree and what I don't agree with, you're definitely not cynical. You're critical and those are very, very essential differences. So for all of you that are critical and are not part of the TRTS network, please join our network. We have an awesome group of like minded watch nerds. Everybody's equal, everybody's passionate and everybody's entitled to their own opinion and we actually love to hear that opinion. So David, thank you so much. I have had a blast sitting down with you again for an awesome Q and A mailbag episode. For all you dear listeners, thank you for taking the time to listen to this episode. You can find all our previous episodes on our official website www. Therealtime show and you can find us on Instagram via the handle @therealtime show, which is the same as our URL. If you want to support the show, please subscribe, like rate it and obviously share it with your friends. If you have any questions, feedback and or criticism, critical or skeptical or even pessimistic, but of course also positive, please send us a message. You can also DM us. If you want to join the TRTS community, you can reach David on his Instagram handle V A u C H E r Rob you can find obnudds and me you can find Lon benjoseph Like my full name. And if you prefer to send us an email just add our first name to our URL at therealtime Show. Stay sane and keep on ticking sa.